Royalties in the Music Industry: Web2 vs. Web3
What Are Royalties?
As defined in our comprehensive guide to royalties:
“Royalties are the earnings rightfully owed to the owners of a patent, intellectual property, asset, or copyright when these are used for commercial or profit-making purposes.”
These payments are critical for artists, especially in an era where streaming dominates. Let’s break down how Web2 and Web3 handle them.
Web2 vs. Web3: Core Differences
Web2: The Age of Intermediaries (2004–Present)
Web2 emerged alongside social media platforms like Facebook and YouTube, transforming the internet into an interactive space (read-write). However, its centralized structure prioritizes platforms over creators:
- Revenue models rely on advertisements and subscriptions (e.g., Spotify, Apple Music).
- Artists depend on intermediaries (labels, distributors) to access audiences.
Web3: Ownership & Decentralization (2014–Present)
Coined by Gavin Wood (Ethereum co-founder), Web3 is built on blockchain technology, emphasizing:
- Decentralization: No single entity controls data.
- Permissionless access: Anyone can participate.
- Trustless transactions: Smart contracts automate agreements.
- Native payments: Cryptocurrencies (e.g., Ethereum) and NFTs enable direct earnings.
While still evolving, Web3’s potential to democratize royalties is undeniable.
Royalties from Digital Streaming
Web2 Streaming: Low Payouts, Opaque Systems
Streaming platforms like Spotify and Tidal became lifelines during the COVID-19 pandemic, often serving as artists’ sole income source. However, payouts remain notoriously low:
- Artists earn $0.003–$0.005 per stream—requiring ~250 streams to buy a coffee (Soundcharts).
- Intermediaries take significant cuts: Labels and distributors control payouts, leaving artists with ≤15% of revenue (Citigroup Report).
Example: An indie artist earning $1,000 monthly from Spotify likely generated ~250,000 streams, yet labels deduct fees upfront.
Web3 Streaming: Direct Artist-to-Fan Economies
Blockchain eliminates middlemen. Platforms like BitSong Studio, Sound XYZ or AnotherBlock let artists:
- Set royalty splits via smart contracts.
- Tokenize royalties as NFTs, enabling fans to invest in songs.
Case Study 1: Adam Clay, aka Mr. Babylonia
Adam Clay: Italo-Barbadian singer, producer, and BitSong Co-Founder, Adam Clay has redefined fan interaction by launching his $CLAY FanToken and multiple Music NFTs on BitSong Studio. With a decades-long career and global collaborations, Adam has fused his musical legacy with blockchain innovation.
His most iconic release, "Born Again - Babylonia", revolutionized electronic music by blending Caribbean rhythms and European influences. Today, through BitSong, Adam offers fans direct access to his creativity, delivering real-time royalties and fostering a borderless connection with his audience.
- $CLAY FanToken: Adam Clay’s official token (explore here) lets fans vote on exclusive decisions, unlock premium content, and earn rewards tied to his projects.
- "Ready Or Not": The first Music NFT ever released on BitSong Studio (collect it here), this track merges futuristic synths with tribal beats, generating thousands of $BTSG in real-time royalties.
- "Feel The Vibe" (with Dino Brown): Partnering with Dino Brown, Italy’s legendary dance music producer (NFT available here), this NFT combines dancefloor energy with soulful melodies, becoming a viral sensation with real-time transactions and global engagement.
Through BitSong, Adam Clay has transformed how artists and fans collaborate, proving that the future of music is decentralized, transparent, and full of possibilities.
Case Study 2: Rihanna’s Producer Jamil “Deputy” Pierre
Pierre sold 300 NFTs representing 0.99% royalties from “Bitch Better Have My Money” (2015) on AnotherBlock.
- Each NFT: 0.0033% royalty share, priced at $210.
- Total earnings: $63,000—surpassing 1% of the song’s Web2 streaming revenue since 2015 (Billboard).
Case Study 3: Justin Bieber’s Producer Andreas “Axident” Schuller
Schuller sold 2,000 NFTs for “Company” (2015) at 0.017 ETH each (~$28 in 2023):
- Each NFT: 0.0005% ownership, tied to future royalties.
- Earnings: 34 ETH (~$56,000), showcasing Web3’s scalability.
Schuller’s take:
“The fusion of blockchain and music rights opens a whole new realm for rights holders and enthusiasts. This approach is democratic and signals the future.”
Find out the 2025 best 5 Music NFTMarketplaces.
Royalties from Music Sales
Web2 Sales: Shrinking Margins
Despite streaming’s rise, physical/digital sales still matter. Yet artists earn minimal profits:
- CDs: Fans pay ~€16, but artists receive €1.17–€1.60 after labels, production, and retail cuts (IFPI).
- Downloads: Platforms like iTunes take 30% fees, shrinking margins further.
Web3 Sales: NFTs & Physical Bundles
Artists bypass traditional retail by bundling NFTs with physical products:
- Limited editions: Vinyl + NFT combos create exclusivity.
- Resale royalties: Smart contracts ensure artists earn on secondary sales.
Example: In 2021, Deadmau5 sold “HEAD5” NFTs with unreleased tracks and merchandise, earning $888,000 while retaining resale rights.
Web3: The Decentralized Future?
As explored in “What Are Royalties and How Are They Divided?”, Web3 envisions a trustless ecosystem where artists control their work. Benefits include:
- Full ownership: No label mandates or delayed payouts.
- Global reach: Permissionless platforms like OpenSea enable borderless sales.
- Fan investment: NFTs let supporters profit from an artist’s success.
Challenges to Adoption
- Scalability: High gas fees on Ethereum strain small artists (though layer-2 solutions like Polygon help).
- Education: Many artists lack blockchain literacy.
- Regulatory uncertainty: Laws around NFTs and crypto remain fluid.
Despite hurdles, adoption grows:
- released a Web3 rap group via Bored Ape Yacht Club , .
- Universal Music Group partners with Curio for NFT royalty projects (Billboard).
Conclusion: A New Era for Artists
Web3 redefines royalty distribution, offering artists unprecedented control. While still niche, its traction is clear:
- 76% of indie artists now view NFTs as viable income streams (Water & Music).
- Stars like Eminem and Grimes experiment with Web3 to deepen fan connections.
As platforms evolve, the question isn’t if Web3 will disrupt music, it’s how soon.